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Back taxes refer to any taxes that were not paid in full when they were due. These can include federal, state, or local taxes, and they may accrue penalties and interest over time if they remain unpaid. Back taxes can arise from underreporting income, filing a return late, or failing to file a tax return altogether.
The IRS and state tax agencies take aggressive measures to collect back taxes, which may include:
- Penalties: Late payment penalties can be as high as 25% of the unpaid tax.
- Interest: Interest on back taxes accrues daily from the original due date.
- Liens and levies: The IRS may place a federal tax lien on your property or levy wages and bank accounts to collect back taxes.
To resolve back taxes, taxpayers can pay the full amount, set up an Installment Agreement, or apply for an Offer in Compromise if they qualify. It’s important to address back taxes as soon as possible to avoid further penalties and enforcement actions.